This paper examines ethical challenges faced by business leaders through the lens of a case study involving Elaine, a loan officer navigating conflicting moral and corporate obligations. The analysis applies utilitarian and deontological moral philosophies to evaluate the advantages and disadvantages of her decisions across five business scenarios. The paper discusses Kohlberg's stages of moral development, virtue ethics approaches, and organizational culture implications. It concludes that ethical leadership requires balancing personal moral convictions with company policy and broader societal impact.
Business managers and executives routinely face ethical challenges that require them to demonstrate ethical leadership in resolving complex conflicts between personal conviction and organizational policy. Elaine's situation exemplifies the ethical dilemmas experienced by leaders as they weigh the advantages and disadvantages of each decision.
The first decision involves Graphic, Inc.'s loan application. The company was engaged in litigation concerning the promotion of its products to children (Ferrell, Fraedrich & Ferrell, 2012, p. 177). The advantage of Elaine's decision to decline the loan is that she acted in a morally acceptable manner. The disadvantage, however, is that she lost a money-making opportunity and had no substantial reason to doubt the firm's ability to repay the loan.
In the second situation, a Canadian firm sought financing for importing cigars from Cuba. The advantage of her decision to decline was that it aligned with clear policy guidance—the 1996 Helms-Burton Act. The disadvantage is that her decision effectively discriminated against the Canadian-based company due to its dealings with Cuba, potentially limiting legitimate business opportunities.
The third scenario involves Electrode International, which was requesting a loan. The advantage of declining the loan is the evidence of illegal and unethical business practices. The disadvantage is that Elaine had no reasonable proof of Electrode's involvement in such practices or concrete justification for her suspicions about its unusually high profits.
For the Brazilian firm scenario, the advantage of her decision was demonstrating that UBC prioritized environmental protection. The disadvantage is that the company lost a business opportunity to a competitor. Finally, in the fifth situation, Elaine's consideration of accepting a loan application through commission incentives would be advantageous because of the likelihood of substantial profits. However, this decision could result in her husband's loss of employment, which could hinder their child's education and threaten the loss of their home.
The ethical and legal considerations differ for each stakeholder. For Elaine, the challenge involves making decisions on matters she considers morally wrong while the company may regard them as acceptable. For the company, the major challenge is determining the best course of action when Elaine's moral stance continues to create negative impacts on profits. For Dennis, the ethical consideration relates to the most appropriate action to reverse the decline in his commissions and the company's performance.
Two moral philosophies are directly relevant to Elaine's situation: utilitarianism and deontology. Under utilitarian philosophy, decisions must be made in a way that produces the best overall action and maximizes benefit. Deontology, by contrast, emphasizes performing the right action based on duty and principle, regardless of consequences (Ferrell, Fraedrich & Ferrell, 2012).
Elaine has rejected loan applications from several companies based on her conviction that declining was the right thing to do, given those companies' questionable business practices. This approach aligns with deontological ethics. Additionally, she considers that approving ABCO's loan would contribute to the benefit of everyone in the company, which reflects utilitarian thinking.
The implications of each decision are evident in the advantages and disadvantages outlined above. Generally, her unwillingness to approve certain loans promotes and enhances the moral practices of UBC. However, her moral stance could prove harmful to the company if decisions continue to result in lost business opportunities and reduced profits. Therefore, approving controversial loans would improve the company's financial bottom line but could potentially harm other stakeholders' welfare. In contrast, upholding her moral stance in all cases may result in significant losses for the firm and eventual loss of employment for Elaine.
Ethical dilemmas have become major challenges in the business environment. Elaine's situation falls under Stage 4 of Kohlberg's stages of moral development within conventional morality. Kohlberg argues that this stage is characterized by broad concerns with society as a whole. The individual focuses on respecting authority, conducting duties in a manner that maintains social order, and complying with laws (Crain, 1985, p. 122).
In the context of organizational decision-making, employees operating at this conventional level should adhere to company policy and code of conduct regardless of personal preference. Since Elaine's company policy does not stipulate exceptions for loan amounts or business circumstances, it implies a comprehensive approach to ethical standards. Employees must notify stakeholders about decisions made in compliance with organizational policy.
The leader's use of a virtue approach in addressing ethical issues has significant impacts on organizational culture. This approach contributes to a workplace where employees do not enforce their own personal moral perspectives in deciding what is right or wrong. Instead, the organization develops a culture where employees examine the company's code of conduct and other organizational policies to determine their decisions and actions (Ferrell, Fraedrich & Ferrell, 2012, p. 167). Employees at the conventional moral stage align their professional conduct with established organizational guidelines rather than individual conviction.
"Virtue ethics and policy compliance in organizational settings"
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